On 20 March, when the Chancellor, Rishi Sunak, first announced the packages being put in place to support people’s incomes, he stated these were “unprecedented measures for unprecedented times".
The Chancellor has since frequently stated that he will "do whatever it takes" to protect people and businesses from the financial consequences of the pandemic.
Despite this, a number of groups of individuals and small businesses have fallen through the cracks with devastating consequences for those affected, and it was for this reason that ExcludedUK was established.
For a full breakdown of the numbers behind the 3 million excluded UK taxpayers - see our full report here.
Who is excluded?
- Newly Self-employed: those who took the plunge to start something new or build something out of passion. These are individuals who set up in business after 6 April 2019 and therefore do not have a tax return from the required 3 year period 2016-17/2017-18/2018-19. Equally, those new in business typically will have high overheads in their early phase and some may also find themselves not in profit for various reasons and may therefore be excluded from support
- Non-trading Profit more than 50% Trading Profit:
- PAYE/Self-employment mix with less than 50% of income from self-employment: many who start out in self-employment do so gradually and will often continue PAYE work to minimise risk. However, they cannot claim SEISS based on their income from self-employment if this forms less than 50% of their total income
- Other income: the following are also taken into account when calculating entitlement to SEISS:
Savings: many save in order to cover future tax bills. However, whether for tax or for other purposes, we do not believe that savings should be taken into account
Pensions: anyone in receipt of pensions payments while also in self-employment eg. those dipping into their pension early, army pensions, widow's pensions
Redundancy payments: any such payments received within the applicable 3 year period will be taken into account
Rental Income: including those taking in lodgers often out of necessity financially, holiday lettings
- Trading Profits +£50k: someone with £49,999 trading profits will receive just short of £2,500/month for the first three months of the SEISS scheme and just short of £2,190/month for the last three months of the scheme. Someone with £50,001 trading profits will receive no support. Contrary to what the Chancellor has stated, based on the data that we have analysed, the majority of those earning over the £50k cap are not high earners. many are within the £50k-£70k bracket, not +£200k as the Chancellor has suggested
- Maternity/Parental/Adoption Leave: for those on maternity leave during the 3 year period taken into account for SEISS during which their usual earnings would have dropped and therefore their entitlement is not based on their usual income (see more below)
- New Starters: individuals who had started work, or who were due to start work, after the Government’s designated cut-off date (initially announced as 28 February and subsequently extended to 19 March) and who were therefore deemed ineligible for support under the CJRS. Also, those individuals who started work before the cut-off date but are still ineligible for support because their employer had not submitted the required paperwork to add them to the payroll
- Denied Furlough: it is for employers to decide whether to furlough their employees. Many have been denied furlough when they could have benefitted from the scheme. Specific examples include those on maternity leave, those shielding and zero hours contract workers
- Employees made redundant: those made redundant before 28 February and not eligible to be included in the CJRS. It also includes those made redundant after 28 February, but before 19 March whose previous employer does not agree, for whatever reason, to re-employ them and place them on temporary leave
- Directors of Limited Companies: Dividends/PAYE: the standard setup for limited company directors is to take a small PAYE salary, typically £719/month, and the rest in dividends. The reason for this is due to fluctuations in income from month to month. A director can only take dividend payments when the company is in profit. While limited company directors can claim CJRS, this typically works out at ~£575/month. However, what is even more problematic is the fact that a director cannot continue to work. So directors face the dilemma of trying to claim for the small amount they can and not working, or trying to save their business. This is not in line with SEISS whereby the self-employed who qualify can continue working
Companies not in profit: many companies will have very little profit if any during certain periods, especially in a start-up or growth phase where one be placing one's hard-earned savings into a new venture or to boost a business (the same of course applies to any new business, whether self-employed or limited company). Any payments taken from business revenue generated will be classes a repayments to a director's loan, but this is still income for a limited company director in this position
Annual PAYE: any directors who submit their PAYE annually and missed the RTI cut-off date are not entitled to claim under CJRS
Business Grants: Many businesses cannot access grants due to working in a non-fixed manner. Many renting premises have also not been able to access these grants. And while funding was provided for discretionary grants to be issued through local councils, the criteria for these grants has been interpreted differently from council to council, creating significant disparities
- PAYE Freelancers: those on short-term PAYE contracts cannot claim CJRS despite being on payroll. Those in this category, whilst working as freelancers, are often required to be on payroll. Nor can they claim SEISS if less than 50% of their earnings comes from self-employment
- PAYE Tronc Payments / Discretionary Commission: some employees, eg. in the hospitality industry, have tips collected electronically and then included in their payslips. Despite these payments potentially making up a large proportion of an employee’s regular income and being subject to income tax, they are not considered as wages in the furlough pay calculations. Similarly, discretionary commission can make up a significant portion of income but is excluded from calculations from CJRS. Therefore, while someone may receive furlough, on these situations, the payments received may be significantly lower than their usual incomes
- Maternity/Parental/Adoption Leave: many new parents have faced significant difficulty, often denied furlough and unable to return to work due to childcare being unavailable as a result of Covid-19 (see more below)
Maternity, Parental and Adoption Leave:
Thousands of new parents have faced an extremely challenging time since lockdown and social distancing measures to battle Covid-19 came into effect. Whilst necessary, they have been completely overlooked with no help or support, having to struggle both financially and with mental health.
One of the key issues facing new parents in relation to employment is safe childcare for their babies due to the risk presented by Covid-19, thus not being able to return to work and missing essential maternity and adoption health care support. Many have not been furloughed and have faced discrimination.
The UK Parliamentary Petition, Extend Maternity Leave by 3 months with pay in light of COVID-19, was launched on 20 April 2020 and now has over 235,000 signatures. This petition calls for 3 months additional Statutory Maternity Pay and Maternity Allowance of £151.20 per week or 90% of average weekly earnings. That’s approximately £1,965.60 per person for 3 months, which is significantly lower than a person on furlough for 3 months.
The Petitions Committee inquiry on this matter has also identified a number of issues regarding existing entitlement to parental leave and pay, and the childcare sector. This also includes adoption pay and leave, special guardians and neonatal leave.
Consequently, many new mothers have been denied furlough, or for the self-employed had their SEISS calculations vastly reduced due to being on maternity leave during the 3 year period taking into account, thus strongly disadvantaging those on maternity, parental or adoption leave.
This is not an exhaustive list of those excluded from meaningful support. There are many exclusive that affect people in many diverse situations across all employment statuses, professions and industries.
We urge the Government to recognise the unfairness and disparities resulting from these exclusions in Government Covid-19 financial support schemes, and we call for urgent redress.